Capstone Green Energy Holdings, Inc. (CGEH)·Q2 2026 Earnings Summary

Executive Summary

• Q2 FY2026 revenue rose 25% year over year to $28.385M, gross margin expanded to 32% (from 31%), and net income was $0.834M; Adjusted EBITDA reached $4.527M, marking the sixth consecutive quarter of positive Adjusted EBITDA .
• Reported GAAP EPS was a loss of $0.89 due to HLBV accretion of preferred units, while “EPS from operations” was $0.04, reflecting strong underlying operating results .
• Mix and pricing drove performance: higher-capacity product sales and stronger rental pricing lifted gross profit by $2.0M YoY; DFMA cost-out initiatives offset new China tariff costs .
• Leadership changes during the quarter (CFO resignation and interim CFO appointment; Board Chair change) were disclosed alongside pre-announced strong results, a potential narrative catalyst for investor focus on execution continuity .
• Strategic focus sharpened on microgrids and data centers as management highlighted positioning for electrification-driven growth and distributed generation tailwinds .

What Went Well and What Went Wrong

What Went Well

• Product mix and pricing: Higher-capacity product sales and stronger rental pricing drove a $2.0M YoY gross profit increase and 100 bps gross margin expansion to 32% .
• Sustained profitability discipline: Sixth straight quarter of positive Adjusted EBITDA ($4.527M in Q2), reflecting operational efficiency and lower non-recurring costs; net income of $0.834M vs. prior year loss .
• Strategic positioning: “Capstone today is a different company - more resilient, more focused,” with emphasis on microgrids and data centers as key growth markets; “delivering clean power where and when the world needs it most” .

What Went Wrong

• Reported GAAP EPS optics: Despite net income, reported EPS was a loss of $0.89 due to HLBV preferred accretion, which may confuse headline comparables and screens .
• Working capital drag on cash: Total cash and restricted cash fell to $7.697M, driven by higher AR and deferred revenue timing; net cash used in operating activities was $1.045M YTD .
• Tariffs and costs: New tariffs on imports from China added cost pressure (partially offset by DFMA cost-outs); ongoing product development and incentive compensation increased OpEx .

Financial Results

Segment revenue breakdown:

KPIs and liquidity:

Notes:

• Cal Microturbine acquisition (closed Aug 13, 2025) contributed $0.7M revenue and $0.2M earnings in Q2 .
• YTD FY2026 revenue was $56.256M vs. $38.364M YTD FY2025; YTD gross margin improved to 29% from 28% .

Guidance Changes

No formal quantitative guidance (revenue, margins, OpEx, OI&E, tax rate, segment-specific guidance, dividends) was issued in Q2 FY2026 press materials or call resources reviewed .

Earnings Call Themes & Trends

Management Commentary

• CFO: “Capstone’s continued resilience and disciplined execution have driven our sixth consecutive quarter of positive Adjusted EBITDA, supported by solid growth in both product and rental revenues.” Also highlighted improving financial health and customer confidence .
• CEO: “Capstone today is a different company - more resilient, more focused... positions Capstone to expand participation in... microgrids and data centers... building a company positioned for sustainable growth and long-term value creation” .
• Q1 FY2026 CEO framing: “Foundational strides... uniquely position us... as surge in distributed generation and microgrid growth gains momentum” .

Q&A Highlights

• The call highlighted momentum in AI/data center infrastructure and emissions reduction, reinforcing demand drivers within distributed generation and microgrids .
• Management emphasized continuity after leadership changes (interim CFO appointment), pointing to a “deep leadership bench” and execution stability .
• Margin expansion drivers were clarified: mix and pricing, DFMA cost-outs, and tariff offsets, consistent with the press release .
• EPS clarification: Reported GAAP EPS reflects HLBV accretion on preferred units, whereas “EPS from operations” better reflects Q2 operating performance .

Estimates Context

• S&P Global Wall Street consensus estimates for Q2 2026 (EPS, revenue, EBITDA) were unavailable for CGEH at the time of this analysis; comparisons to consensus cannot be provided. Values retrieved from S&P Global.*

Where estimates may need to adjust:

• Given stronger-than-expected operational EPS ($0.04) and Adjusted EBITDA ($4.527M) alongside margin expansion to 32%, any future coverage may need to reflect higher profitability run-rate assumptions, balanced by GAAP EPS optics and working capital dynamics .

Key Takeaways for Investors

• Underlying operating strength: Mix/pricing and DFMA cost-outs are driving sustained margin expansion and positive Adjusted EBITDA; watch for continued rental utilization improvements .
• Headline EPS optics vs. fundamentals: GAAP EPS negative due to HLBV accretion despite net income; focus on operational EPS and cash conversion to avoid misinterpretation .
• Execution through leadership transition: Interim CFO and Board Chair changes increase governance scrutiny; continuity messaging and ongoing covenant compliance support near-term stability .
• Strategic exposure: Accelerating focus on microgrids and data centers creates optionality in electrification and resilient power themes; monitor pipeline conversion and segment mix .
• Working capital discipline: AR build and deferred revenue timing pressured cash; near-term watch on OCF trajectory and FPP claims vs. shipments .
• Tariffs manageable but persistent: China tariff costs are an ongoing headwind partially offset by DFMA; monitor margin resilience if pricing/mix tailwinds fade .
• M&A integration: Cal Microturbine contribution was modest but strategically expands direct distribution/service footprint; track synergies and incremental revenue/earnings realization .